Kenexa drops following analyst downgrade

Shares of Kenexa Corp. sank nearly 5 percent Wednesday after an analyst downgraded the stock predicting that sales of the company's recruiting and retention software are likely to slow.

Friedman, Billings, Ramsey analyst David Hilal cut his rating on the stock to "Market Perform" from "Outperform" but maintained his $25 price target. The analyst warned that a weakening domestic economy could lead to softer spending on information technology in the second half of 2008 and early 2009, hurting enterprise software vendors such as Kenexa.

Hilal added that Kenexa could be particularly vulnerable to the spending slowdown since IT decision makers consider "human capital management" software a low priority in the current environment.

In addition, the analyst said, the Wayne, Penn., company could face challenges as it attempts to expand internationally since the economic slowdown in the U.S. appears to be spreading overseas.

Kenexa's shares fell $1.10, or 4.7 percent, to $22.27.

The stock has ranged between $16.07 and $34.50 over the past 52 weeks, and is up 15 percent since the start of the year.